If you want to create a FinTech startup today, you are advised to start your strategic thinking with a review of the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the Anti-Drug Abuse Act of 1988, the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Money Laundering Suppression Act of 1994, the … well, you get the picture. What these confining regulatory demands do is confound the ability of startups to think creatively about possible financial products and services. And that’s bad for everyone.
Don’t get me, wrong — I am not advocating a weaker regulatory framework. I am, however, advocating for an easier regulatory framework. Last July, the Department of the Treasury held a competition called My Money AppUp. The competition, which included a grand prize of $10,000, sought out “the best ideas and designs for next-generation mobile tools to help Americans control and shape their financial futures.” The winner was Centz, which helps students manage their debt — a worthwhile app, for certain.
But is this the best use of Treasury funds and efforts when Silicon Valley is preoccupied with doing the same — and for the potential to “win” a lot more than $10,000? The short answer is no.
The regulatory agencies — Treasury, the Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, et al — should in measure, if not equal measure, consider ways to ease the regulatory burden (without eroding the regulatory framework).
You want a competition to run, Treasury, how about offering $10,000 to the idea that makes adherence to existing regulations easier for financial services companies? Throw a carrot into the marketplace for an idea that makes it simpler for a startup that wants to engage in financial services to, well, start up.
(No word from the Treasury Department on whether iot will hold the AppUp competition again this summer.)
This is not just some fanciful, let’s-help-the-banks notion. The regulatory burden has a cost for every American, regardless of credit score. Regulators should take responsibility for that cost and endeavor to minimize it. I see no evidence of such an endeavor, particularly from the new CFPB. Well, I suppose regulators can ignore this call — if they want to squash FinTech startup engine, too.